European Real E Share Discussion Threads

[flyfisher] 22/3/2015 13:31

Colonel, It seems fairly straightforward to me.

Their is an unresolved tax issue regarding property sales for which the directors see a low probability of material liabilities and see no need to make a provision at this time.
Pending the formal outcome of the tax issue they need to retain the cash just in case they are a wrong.

Note that it is only the directors opinion and that they are often wrong.

One would assume that when the liability is quantified, then they will be in a position to make further cash distributions.

As part of the winding down they have been merging several of the individual trusts in which the properties are held, maybe this is the source of the tax problem.

[redhill9] 22/3/2015 11:29

Just looked at the Cash Flow statement expecting to see full or part settlement of the £967k py tax liability, but it's not reported separately and not obviously reported within any other figure. Part of the balance sheet movement will be exchange revaluation as well, so even less clear what the bs figure represents.

[redhill9] 22/3/2015 10:49

Good idea Colonel A.

The tax charge for the year is only £30k yet the amount carried in the balance sheet as a liability at 31/12/14 is £3,080k, down £1,027k from £4,107k the previous year. The difference could reflect settlement of the previous year's charge of £967k +/- differences/adjustments. If that is correct, the question is why is there a liability of c.£3m being carried from prior to 2013? Good spot janvrot, if you're correct in your suggestion that it is a disputed liability that may not be payable then the positive impact on future NAV is very welcome.

[colonel a] 22/3/2015 10:28

Flyfisher,

Well spotted but as clear as mud.

Somebody smarter than me would need to explain how something which does not need to be provided for restricts use of funds.

I think it's reasonable to ask for clarification and will email requesting such unless you already plan to do so.

[flyfisher] 22/3/2015 09:17

Thanks janvrot. That would give 2 tax issues then. The one you describe, which is provided for in the accounts, and the one described in note 13 that has not been provided for and which seems to be the reason for their inability to pay a greater distribution.

Potential tax liabilities (as described in Note 13) restrict our ability to return significant further funds at this time.

13. As part of routine tax enquiries the Group has certain open items, the tax effect of which has not been provided because the Directors do not consider it probable that further material liabilities will arise.

[janvrot] 21/3/2015 20:52

Note 23, Trade and other Payables.

If I recall correctly the liability relates to the sale of Duren. The germans have some complicated tax law which ERET is disputing. Does anybody have any more info on German tax and can game the probability of the tax being paid. Thanks

[flyfisher] 21/3/2015 16:44

Janvrot, Where in the accounts is the £3m liability shown?

thanks.

[tiltonboy] 21/3/2015 15:50

zangdook,

You can use your funds from the Tender to buy back in!

In situations like this I like to take the cash and run. All well and good utilising cash to buy in the market, but those that remain end of up with an increasingly illiquid vehicle, and usually the assets that won't shift!

[colonel a] 21/3/2015 15:07

Given the drop in the Euro £1.68 is better than I expected.
And there appears to be modest progress on all fronts.
I think the share price will react favourably.

As a an individual holder I would like the company to buy in the market but suspect that institutional holders don't care so much about the daily share price {essentially they can't sell piecemeal} and a return of capital is the tax efficient way for them to get money out.

[janvrot] 21/3/2015 13:30

I agree buying back the shares at market value (99p) is a much better idea. Not sure why they prefer using book value. There is obviously a seller who has pushed the price down 20p. The buyback at market value will allow this seller to exit while benefiting long term shareholders.

WRT tax. There is a GBP3mil liability that relates to prior sales of german property. Management have recognised the liability in the accounts even though they believe that the tax will not be paid. If management are correct the NAV will increase by 11p.

Obviously they dont want to get ahead of themselves and pay the GbP3mil as a dividend until they have final resolution on the issue.

[zangdook] 21/3/2015 13:10

I just meant I'd prefer the company was using its cash reserves to buy shares at a discount rather than paying NAV. They could be buying around a pound, why do they want to pay £1.68?

[redhill9] 21/3/2015 09:31

Apart from the costs of making a distribution (not sure how material those costs are), surely the only situation where buybacks are better than a distribution is when there are tax consequences, as there appears to be now, and even then there may be a trade-off between the tax cost and the value of getting the cash now rather than later?

In all normal situations, I'd suggest a redemption of shares for cash at full NAV value is preferable to a gradual reduction in the discount that only becomes equal to full NAV at future redemption.

[zangdook] 21/3/2015 03:26

I'd prefer they did buybacks as long as there remains a substantial discount. It's better value for those of us who are here for the long term, and would support the share price and provide an exit for those who want out sooner. It would probably have lower costs as well - presumably there are fees involved in getting new ISIN codes and sending out cheques and so on.

[redhill9] 20/3/2015 19:10

Thanks flyfisher. As you say, the distribution is welcome but the tax comment may mean we have to wait for more.

Only had a quick scan of results so far but look OK to me, with two major concerns:
1) Panrico could still have a material impact on value if they default.
2) It's going to take some time before all properties are sold.

Discount using NAV of 168p is around 40% which looks appealing in itself but obviously reflects those concerns. I may buy more if the market doesn't react too favourably to these announcements.

[flyfisher] 20/3/2015 18:35

Todays results read ok and give cause for some optimism for the sale of Kaiserslautern.
The imminent redemption at 168p is welcome, but only distributes part of the cash. I admit that i do not understand the tax implications of further distributions and wonder if, with that complication, they will now commence a buy in.

[colonel a] 04/3/2015 16:06

An, as yet, unreported buy ?

Personally, I'll be happy if the company have started to buy back in face of the stubborn discount.

[ifthecapfits] 04/3/2015 09:40

Divi please ;)

[n1mgn] 04/3/2015 09:31

it is rather frustrating , I am sure the company must have accumulated a fair amount of money by now and i would like to know what they are intending to do with it ,
any ideas anyone ,

[colonel a] 04/3/2015 08:46

FF,
Yes, similarly - I believe a previous post {article ?} gave October as the completion date which clearly left the same gap issue.
An update seems somewhat overdue.
As indeed is some good news.

[flyfisher] 03/3/2015 17:08

I have read that the IBM new office, the crown in nice meridia being developed by artea is scheduled to be completed late 2015, early 2016.

These things are rarely ahead of schedule so it seems likely that we will continue to receive the rental income for at least another year.

[colonel a] 02/3/2015 10:54

Bailiffs ?

[flyfisher] 02/3/2015 09:45

The IBM lease was up at the end of February but they have not moved out. One can only assume a lease extension. I am surprised that it has not been announced.

[colonel a] 27/2/2015 15:17

Are we not due an update ?
Something along the lines of ...
...
Dear shareholders,
Please do not fret.
The devaluation of the Euro in response to QE should reverse, at least partially, in the coming months.
And said QE will hopefully have the same +ve impact on property values that it did in the UK.
En plus; Nice is indeed nice, blessed with many fabulous restaurants, and we hope that the increasing demand for not so affordable housing, will result in a speedy rezoning of our La Gaude asset.
Finally, there are green shoots of growth appearing in Spain and Panrico is still hanging in there.
Your patience will probably be rewarded, eventually.
...